Is cash (still) king?

By Klarna Commercial

Today in the Nordics we can choose from a variety of payment options if we want to pay cash when shopping online.

Card payments is the most popular payment option on a global scale, but that is not really the case for the Nordics. To narrow it down we are going to focus on the share of card payments that are paid directly, called debit cards. A debit card is traditionally connected directly to your bank account where the money is withdrawn when the payment is fulfilled.

Another way to pay cash online is to use direct bank transfer. This is a traditional service offered, where the consumer in most cases complete their payment in their online banking environment and then later is redirected back to the store. In Sweden the consumer can choose between the 4 major banks and in Finland 9 banks are available through Klarna.

Finally we have some newcomers in the debit payment space in the Nordics. What they all have in common is that they require signing with digital identification. At Klarna we have launched Klarna Direct in Sweden, which today has more than 3 million users. Then, there are other alternatives like Swish, Vipps and MobilePay among others, which besides using digital identification also require an external application to fulfil the transactions for the consumer.

How can consumers pay?

When looking at the different payment options offered today, you can group them by when and how you actually follow through with the payment. As a consumer you can choose to pay now, pay later or slice the payment in smaller parts during a period of time, for example over 6 or 24 months. To group all the payment options, we will call them debit and credit. Credit means all options were the payment actually is fulfilled after the purchase; invoice, part payment and credit cards.

The focus area today is statistics and trends on how consumers prefer to pay, when it comes to paying “cash” or debit, online.

How do the consumers actually pay today?

When we look at the total share of payments, the “cash” payments are a smaller part of the total for the Nordics in general. We are going to narrow it down to the markets Sweden, Norway and Finland. Both as a whole and individually.

The data is based on Klarna transactions from full year 2017.

Cash might not be king after all…

Cash payments is a smaller part (20,6% R12) of the total share in the Nordics. It differs a little between the markets, but not more than a couple of percentage points.

We do not actually see any big break of trends regarding the share of debit payments during 2017. There is a small increase on all the markets during Q4 in comparison of the full year 2017, but they are too insignificant to make any direct assumptions of, as of now. Although we can see a trend break in Sweden between the debit payment options. The Klarna Direct share has increased to a total share of 11% of the checkout in Q4, an increase of over 50% comparing to full year.

What we do see is a need for consumer friendly payment options. The trend on the Swedish market is that consumers prefer the debit payment option where they only need to sign with their digital identification, Bank ID. The payment is completed in an instant without the consumer having to enter any card numbers, login in to their online bank environment or use any other external applications on their phone. If you also get buyer protection as a consumer – even better. The consumer is clearly value driven and prefers the payment options with the least friction possible.

You should also ask yourself what value the debit options you have today give your consumers. Do they get extra insurance? Buyer protection? Or something else?

As you could see from the statistics above, Klarna Direct is not yet available in Norway or Finland. It will be launched during 2018, among other things! So stay tuned.